Shareholder Agreements

When we go into business with someone the last thing on our minds is 'what will we do if we have a fallout or worse?'. Just for a moment imagine what you would do if the unthinkable happened.

A shareholder’s agreement allows you to imagine the worst and put plans in place to deal with it. It is likely to be more amicable doing this at a time where you are negotiating as friends, rather than as enemies on either side of the negotiation table.

Shareholders’ agreements vary enormously depending on the country of origin and your particular business, but many joint venture or business startup shareholder agreements would normally be expected to address the following:

Regulating the ownership and voting rights of the shares in the company

Control and management of the company

Making provision for the resolution of any future disputes between shareholders

Protecting the competitive interests of the company

The nature and amount of initial contribution (whether capital contribution or other) to the company

The proposed nature of the business

How any future capital contributions or financing arrangements are to be made

The governing law of the shareholders' agreement

Ethical practices or environmental practices

Allocation of key roles or responsibilities

What happens to the shares if someone dies, leaves voluntarily or is forced to go

What is a good and a bad leaver

How do we value shares

What happens if you face a deadlock if you can’t agree what to do

What if one party wants to sell and the other doesn't

What happens if one party gets divorced

And so much more!

As you can tell from the above list, the resolution of these matters in the early stages of a business can go a long way to mitigating the potential problems in the future. As we deal with businesses like yours on a daily basis we know what can go wrong and how pre-planning can help to ensure things go right.

Therefore, we can help with the preparation of a new shareholders agreement or, if yours isn’t quite functioning as it should, we can review it for you, recommend changes and help negotiate these with your colleagues.

We have a standard shareholder agreement template and checklist available at our online shop, that you can utilise for your individual needs. Whilst we are comfortable with this template, you may like to take legal advice before completion to assist with any local nuances related to your specific position.

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Poonam Kaur

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